MSP Premiums Cut in Pre-Election Budget

Change to cost government $1 billion a year.

Andrew MacLeod is The Tyee's Legislative Bureau Chief in Victoria and the author of A Better Place on Earth: The Search for Fairness in Super Unequal British Columbia (Harbour Publishing, 2015). Find him on Twitter or reach him here.

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“We are instituting a dramatic cut in the premiums as part of a strategy to ultimately eliminate them all together,” de Jong said, introducing the policy highlight in the government’s pre-election budget. “That is the objective.”

B.C. is the only province that charges a tax directly linked to health services and groups as diverse as the Canadian Taxpayers Federation and the Canadian Centre for Policy Alternatives have long criticized the province for raising money through MSP premiums.

B.C. Green Party leader Andrew Weaver, NDP leader John Horgan and Premier Christy Clark have all voiced support, or campaigned, to eliminate the premiums.

De Jong has defended the premiums in past budget presentations, saying they demonstrate to people that health care costs money.

Today he acknowledged the premiums are “an instrument that has attracted a lot of negative comment by virtue of the fact we were the only province with an MSP in the form we had in B.C.”

He also said that with the budget in surplus, B.C.'s finances are now healthy enough to make the tax cut.

Starting on Jan. 1, B.C. will reduce MSP premiums by 50 per cent for households where the family’s net income is below $120,000. Such families, once they register to receive the reduction, will save $900 a year.

The government is also raising the income threshold for MSP exemptions. For individuals, for example, people earning under $24,000 will be exempt.

As a result of the changes, some two million people will no longer pay MSP premiums at all, and another two million will see them cut in half.

Around one million people will not see their MSP premiums reduced.

The MSP changes will cost the government $1 billion a year in lost revenue, de Jong said.

It was unclear when MSP premiums might be fully eliminated. “The timing and structure of the change will be influenced by the province's fiscal capacity,” the budget documents said.

De Jong said future cuts will depend on the province’s financial position.

“It really is Premier Christy Clark’s signature tax cut,” said Jordan Bateman, B.C. director for the Canadian Taxpayers Federation, who had campaigned to have MSP premiums eliminated. “It’s the biggest tax cut in B.C. since the 2007 income tax cut.”

Clark would have had a hard time debating Horgan and Weaver during the election campaign if the government had failed to act on MSP premiums, Bateman said. “The premier herself called it an old and antiquated system,” he said. “She had to do something radical, and this is what she chose to run on.”

The tax cost a lot to collect and was unfair since someone earning $40,000 a year paid the same amount as someone who earned much more, he said.

Adam Lynes-Ford, a campaigner for the BC Health Care Coalition, said he was happy with the reduction in MSP premiums, but worried about unmet health care needs. “The MSP fee break is some relief... but if [seniors] can’t afford health support or residential care, that relief isn't going to go very far.” The MSP premium cuts should have been made in conjunction with changes to the progressive income tax system, he said.

Iglika Ivanova, a senior economist with the B.C. office of the Canadian Centre for Policy Alternatives, said she welcomed the MSP premium cut, but worried that the government failed to replace the $1 billion in revenue it will lose.

“I want to eliminate the entire MSP, not just half of it,” Ivanova said. “It's less egregious. The big problem for me is we’re giving up the revenues at a time when we obviously have unmet needs in the health care system.”

Ivanova also noted that the budget lacked any meaningful action to improve child care, pointing out the child care subsidy last increased in 2005.

NDP finance critic Carole James said the pre-election budget fails to make up for 16 years of mismanagement by BC Liberal governments. “We know this budget won't fool people,” James said in the legislature. “It doesn't work for people to starve our schools and hospitals for years, then pretend you care at election time.”

James said Clark hopes B.C. families will forget that they have faced rising costs for housing, hydro and health care. “She hopes you'll forget how bad things have been for your family,” James said in the NDP’s response to the budget. “The premier hopes you'll forget about how much more you've had to pay for everything.”

An NDP government would respect people and work to make life more affordable in the province, she said.

The government released several spending announcements ahead of the budget over the last week, including a raise of $50 a month to disability assistance rate. Rates remain far below the poverty line.

The government did not raise regular welfare rates, which have been frozen since 2007.

Michael Prince, a public policy professor at the University of Victoria, said he welcomed the small increase to disability assistance, but would have preferred it to be part of a longer term plan. “This is a one-off expenditure announcement with no sense of where we’re going down the road.”

He also said that limiting welfare payments to $610 a month for people who are expected to work is shortsighted. “You need to raise the rates so people will actually be more able, more willing, to take the opportunities available to them.”

Irene Lanzinger, president of the BC Federation of Labour, said she was disappointed by the budget. “There are so many things that need to be done and the government’s not doing any of them,” she said. “The biggest of those is probably a poverty reduction plan... that would increase welfare rates, a social housing strategy, a raise in the minimum wage. Those are things we've been calling for a long time.”

Environmental groups also saw little to praise in the budget.

Torrance Coste, the Vancouver Island campaigner for the Wilderness Committee, said the budget paid little attention to the environment. “Lots of bandaids for problems that require much more than that,” he said. “Nothing that reflects the urgency of climate change or the environment in general in B.C.”

Steve Kux, a policy analyst for the David Suzuki Foundation, said the environment appeared to be an afterthought. “We were especially hoping to see the provincial government step up in terms of investment in new transit infrastructure for the province.”

The budget also predicted a slowing housing market would affect the province's finances, with revenue from the property transfer tax forecast to decline by 23.9 per cent in 2017/18.

Budget Tax Cuts Come at Big Cost for Those Who Need Help

The 15-per-cent tax on foreign buyers of real estate in the Lower Mainland is expected to bring in $100 million in 2016-17 and $150 million in each of the following three years.

The George Massey Tunnel Replacement project is forecast to cost $2.4 billion over the next three years. Total provincial debt is predicted to rise to $77.7 billion by 2020, up from $66.7 billion in 2016-17.

A table in the budget document compares the total taxes people pay in provinces across Canada. It shows that an individual earning $80,000 a year pays the lowest total tax in Canada.

But a family of four with income of $30,000 would pay lower taxes in Quebec, Ontario, Alberta and Saskatchewan than they would in B.C.

The roughly $50-billion operating budget contains significant wiggle room, with a $350-million forecast allowance and $400 million earmarked for contingencies. It forecasts a $295 million surplus for the coming fiscal year.

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